Nomura REIT, Biggest IPO This Year, Falls in Debut: Tokyo Mover

June 12 (Bloomberg) -- Nomura Real Estate Master Fund Inc.,
Japan’s largest initial public offering this year, slid in its
debut as the investment trust run by a unit of the nation’s
biggest brokerage tracked a drop in the market.

The REIT, run by Nomura Real Estate Holdings Inc., fell to
93,800 yen at the close of trading in Tokyo, 6.2 percent lower
than the initial offer price of 100,000 yen. The REIT sold 1.75
million shares in the IPO and raised 175.1 billion yen ($1.8
billion), according to a company statement.

Global REITs are raising funds in Japan amid expectations
that Prime Minister Shinzo Abe’s government will accelerate
efforts to end 15 years of deflation and boost growth in the
world’s third-largest economy. Nomura’s REIT debut came as the
benchmark Topix index fell 0.4 percent after the yen
strengthened overnight.

“The market overall is weak,” said Yoji Otani, a Tokyo-based analyst at Deutsche Bank AG. “The investors at the moment
don’t want to take risk.”

The IPO is Japan’s biggest this year, followed by Nippon
Prologis REIT Inc.’s $1 billion IPO in February, according to
data compiled by Bloomberg.

REITs derive most of their profit from rental income,
paying out the majority as dividends. While investors receive a
yield that is competitive with bonds, they can also benefit as
the value of the underlying properties rises.

Asset Quality

“The quality of the assets in the REIT is not very good,”
said Hideyuki Shinkai, who helps oversees about 51 trillion yen
in assets at Norinchukin Trust & Banking Co. in Tokyo. “On top
of that, the market is down today so the REIT has also been
affected.”

While Nomura’s REIT fell today, the sale is a harbinger of
growth in the country’s REIT market, said Deutsche Bank’s Otani.

“There is no change to the fundamentals of the real estate
market,” said Otani. “As the vacancy rate continues to
improve, rents will rise.”

Japanese REITs may sell about 900 billion yen worth of new
shares this year, more than a record high of 848 billion yen
raised in 2006, said Otani. The acquisitions of properties may
total 2.5 trillion yen this year, he said.